Clarium Capital bets on rates to rise more

Clarium Capital, the $2bn San Francisco hedge fund run by Peter Thiel, the Paypal co-founder, is betting that central banks will raise interest rates far more than most people expect after concluding that the global wave of liquidity is being generated by petrodollars.

Mr Thiel’s thesis is simple, if unconventional. Oil-rich Arab states and gas-rich Russia are earning $600bn a year, which they are investing back into geared financial assets such as structured products, hedge funds and property, supporting global asset prices. The resulting liquidity is helping the price of assets from London homes to equities to emerging market bonds bubble up.


…”It is basically being driven by recycled oil money,” he told the Financial Times.

“It is in effect a regressive trillion-dollar-a-year tax increase on middle-class consumers around the world. The money is sent back to Geneva or London, leveraged several times and invested in financial assets.”

This boom is unsustainable, because – unlike deflationary low-wage Chinese exports – the petrodollar profits come from a shortage of oil, or as Mr Thiel says, it is a “super-inflationary story”.

Financial Times